Exhibit 10.5
WORLDWIDE DATA, INC.
STOCK PURCHASE AGREEMENT
PURCHASE AGREEMENT made as of this 19th day of March, 1999, between
Worldwide Data, Inc. (the "Company"), a Delaware corporation, and Xxxxxxxx
Securities International, a corporation with its principal place of business in
Nassau, the Bahamas (the "Purchaser").
WHEREAS, the Company, through its wholly-owned subsidiary, Worldwide
Online Corp. ("Worldwide Canada"), is engaged in the business of providing
Internet-based services, including Internet-access services and the creation of
intranets and web-sites for corporations (the "Offered Services") and the
Company is presently developing an on-line trading service, an on-line auction
service, a service which enables users to send faxes via the Internet and a
service which allows users to make voice calls via the Internet (the "Developing
Services," together with the Offered Services, the "Services");
WHEREAS, in order to complete the purchase of the common stock of
761395 Alberta Ltd. ("Alberta Ltd."), an Alberta Corporation which is
wholly-owned by Xxxxxxx Xxxxxx, the President of the Company, and which has as
its sole asset an aircraft, the Company wishes to issue and sell to the
Purchaser, and the Purchaser wishes to purchase from the Company, on the Closing
Date (as herein defined), 200,000 shares of the Company's common stock (the
"Shares") on the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the parties hereby agree as follows:
I. ISSUANCE AND SALE OF THE SHARES; REPRESENTATIONS, WARRANTIES AND COVENANTS
OF PURCHASER
a. Subject to the terms and conditions set forth herein, on the Closing
Date, the Company shall issue and sell and the Purchaser hereby agrees to
purchase from the Company, the Shares at a purchase price of one dollar ($1.00)
per Share and the Company agrees to issue and sell such Shares to the Purchaser
for said price.
Subject to the terms and conditions set forth herein, within
thirty-one (31) days after the Closing Date, the Company shall issue and deliver
to Purchaser a certificate in definitive form, registered in the name of the
Purchaser or such Purchaser's nominee, evidencing the Shares so issued and sold
to such Purchaser hereunder. The Purchaser further agrees that payment for the
Shares shall be made to the Company, in accordance with any instructions from
the Company regarding such payment, in good funds on or before March 21, 1999,
unless such date is extended by the Company (the "Closing Date").
b. The Purchaser acknowledges that it (a) is acquiring the Shares for its
own account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof in violation of the Securities Act of
1933, as amended (the "Act"); (b) either alone or together with its advisors,
has sufficient knowledge and experience in business, investment and financial
matters to evaluate the merits and risks of this investment; and (c) is able to
bear the substantial economic risks of this investment and, at the present time,
could afford a complete loss of such investment.
c. The Purchaser represents that it has been furnished by the Company,
during the course of this transaction, with all information regarding the
Company and its principals which it had requested or desired to know; that all
documents which could be reasonably provided have been made available for the
Purchaser's inspection and review; and that the Purchaser has been afforded the
opportunity to ask questions of and receive answers from duly authorized
officers and/or other representatives of the Company concerning the terms and
conditions of the sale of Shares, along with any additional information which it
had requested.
d. The Purchaser acknowledges that it is aware that this sale of Shares
has not been reviewed by the Securities and Exchange Commission ("SEC") because
of the Company's representations that it is intended to be a nonpublic sale
pursuant to Section 4(2) of the Act and the provisions of Rule 504 of Regulation
D thereunder, or otherwise exempt from registration under the Act.
e. The Purchaser represents that it is an "Accredited Investor" as that
term is defined in Rule 501 of Regulation D promulgated under the Act.
f. The Purchaser is not taking, and will not take or cause to be taken,
any action that would cause the Purchaser to be deemed an underwriter, as
defined in Section 2(11) of the Act, with respect to the Shares.
g. The Purchaser understands that the Shares are being offered and sold in
reliance on specific exemptions from the registration requirements of Federal
and state securities laws and that the Company is relying upon the truth and
accuracy of the representations, warranties, agreements, acknowledgements and
understandings set forth herein and in the Investor Questionnaire attached
hereto as Schedule I in order to determine the applicability of such exemptions
and the suitability of the Purchaser to acquire the Shares.
h. The Purchaser has the full right, power and authority to enter into
this agreement. The execution, delivery and performance of this agreement by the
Purchaser has been duly and validly authorized and approved by all necessary
corporate action, if any. This agreement is a valid and binding agreement of the
Purchaser enforceable in accordance with its terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization or
other similar laws and legal and equitable principles limiting or affecting the
rights of creditors generally and/or (b) general principles of equity,
regardless of whether considered in a proceeding in equity or at law.
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i. The Purchaser maintains a domicile or business at the address shown on
the signature page of this Agreement, at which address the Purchaser has
subscribed for the Shares hereunder in compliance with the local laws thereof.
j. The Purchaser recognizes that an investment in the Company involves a
high degree of risk, acknowledges that it may lose its entire investment and has
full cognizance of and understands the risk factors related to an investment in
the Company, which include, but are not limited to:
(i) Losses; Uncertainty of Profitability. Since its inception in
1995 through the date hereof, the Company, through Worldwide Canada, has
incurred accumulated losses of $1.2 million. The Company continues to
incur net losses on a monthly basis and there can be no assurance that the
Company will achieve profitable operations or that Worldwide Canada will
generate meaningful revenues in the future.
(ii) Uncertainty of Business Plan. The Company's plan of operation
and future prospects are largely dependant upon the Company's continuing
ability to offer its Intranet-access services, to create intranets and web
sites for corporations and to offer and develop and market its Internet
fax and voice call services, WorldFAX and WorldVOICE, as well as its
on-line trading and auction services, on a timely and cost effective
basis. There can be no assurance of continued market acceptance of the
Company's Offered Services or that unanticipated problems, expenses or
technical difficulties will not occur which would result in
discontinuation or material delays in the Offered Services. In addition,
there can be no assurance that the Company's Developing Services will be
successfully developed and implemented or that the Company will be able to
continue to develop and market WorldFAX and WorldVOICE successfully. The
likelihood of achievement of the Company's business plan must be
considered in light of the fact that the Company operates in a rapidly
evolving industry characterized by intense competition and an increasing
and substantial number of new market entrants and new Internet products
and services. See "Risk Factors - Increasing Competition; Minimal Barriers
to Entry." No assurance can be given that the Company will achieve its
business plan or generate sufficient revenues to sustain its operations or
become profitable.
(iii) Uncertainty of Future Capital Needs. The capital requirements
required to fund the Company's losses, as well as to continue developing
WorldFAX and WorldVOICE, and to develop the Developing Services and any
other new services are significant. The Company may need to raise
additional funds through public or private offerings or equity financings
in order to fund its losses, continue to develop WorldFAX and WorldVOICE
and develop the Developing Services and any other new services. If
additional funds are raised through the issuance of equity securities, the
percentage ownership of the then current stockholders will be reduced and
such equity securities may possess rights
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senior to the holders of the Company's common stock. There can be no
assurance that additional financing will be available on terms favorable
to the Company, or that the Company will be successful in raising such
financing.
(iv) Proceeds to be Used for Payment to Affiliate of Xxxxxxx Xxxxxx.
Substantially all of the net proceeds of the offering will be used to
complete the acquisition of the common stock of Alberta Ltd., which is
wholly-owned by Xxxxxxx Xxxxxx, the President of the Company, and which
has an aircraft as its only asset. The price to be paid by the Company for
the shares of Alberta Ltd. has been determined by Xx. Xxxxxx based on an
appraisal of the value of the airplane owned by Alberta Ltd. Because of
Xx. Xxxxxx'x involvement with both parties to the transaction, the price
to be paid by the Company and the other terms of such purchase are not the
result of an arms-length negotiation and no independent party determined
the Company's need for the aircraft. The Company will not obtain a
fairness opinion regarding the value of Alberta Ltd.'s common stock. As
the sole shareholder of Alberta Ltd., Xx. Xxxxxx will be the direct
beneficiary of the proceeds of the sale of the Xxxxxx Ltd. shares.
(v) Increasing Competition; Minimal Bafflers to Entry. The market
for Internet-based services is extremely competitive and can be
significantly influenced by the marketing and pricing decisions of the
larger industry participants. The bafflers to entry are minimal and the
Company expects that competition will intensify in the near future. The
Company believes that success will depend upon a number of factors,
including market presence, capacity, reliability and security of its
network infrastructure. Furthermore, the Company will have to compete with
the pricing policies of competitors and suppliers, the timing and
introduction of new products and general economic trends.
The Company's current and prospective competitors in the
Internet industry include many large companies that have substantially
greater market presence and financial, technical, operational, marketing
and other resources and experience than the Company. The Company's
Services compete or expect to compete directly or indirectly with the
following categories of companies: (i) other national and regional
commercial Internet service providers ("IPSs"); (ii) established on-line
service companies that currently offer Internet access, such as America
Online, Inc., CompuServe Corp. and Prodigy Services Company; (iii)
computer hardware and software and other technology companies, such as
Microsoft Corporation ("Microsoft"); (iv) national long distance
telecommunications caters, such as AT&T (with AT&T WorldNet), MCI (MCI
Internet), and Sprint (SprintNet); (v) regional telephone operating
companies; (vi) cable television system operators, such as Comcast
Corporation, Tele-Communications, Inc. ("TCI"), and Time Warner Inc.;
(vii) nonprofit or educational ISPs; (viii) newly-licensed providers of
spectrum-based wireless data services; (ix) national and regional web site
and intranet developers; (x) national
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and regional on-line trading companies and (xi) on-line auction companies.
In addition, TCI recently announced it had reached separate agreements
with Sun Microsystems, Inc. and Microsoft to produce the software
necessary to permit persons to access the Internet through television
set-top boxes beginning in 1999.
The Company anticipates that it will encounter significant pricing
pressure, which in turn could result in reductions in the average selling
price of the Company's services. Large telecommunications corporations may
be able to reduce the communications costs involved in providing
Internet-based services. There can be no assurance that the Company will
be able to offset the effects of any such price reductions.
(vi) Dependence on the Internet; New Industry; Uncertain Adoption of
Internet as a Medium of Commerce and Communications. The Company's
existing and proposed products and services are targeted at users of the
Internet, which has experienced rapid growth. As is typical in the case of
a new and rapidly evolving industry characterized by rapidly changing
technology, evolving industry standards and frequent new product and
service introductions, demand and market acceptance for recently
introduced products and services are subject to a high level of
uncertainty. The Internet services industry is characterized by a limited
operating history and a high rate of business failures. Because the market
is relatively new and current and future competitors are likely to
introduce competing Internet-based services, it is difficult to predict
the rate at which the market will grow or at which new or increased
competition will result in market saturation. See "Risk Factors -
Increasing Competition; Minimal Barriers to Entry." In addition, critical
issues concerning the commercial use of the Internet remain unresolved and
may impact the growth of Internet use, especially in the business market
targeted by the Company. Despite growing interest in the many commercial
uses of the Internet, many businesses have been deterred from purchasing
Internet access services for a number of reasons, including, among others,
inconsistent quality of service, lack of availability of cost-effective,
high-speed options, a limited number of local access points for corporate
users, inability to integrate business applications on the Internet, the
need to deal with multiple and frequently incompatible vendors, inadequate
protection of the confidentiality of stored data and information moving
across the Internet and a lack of tools to simplify Internet access and
use.
(vii) Possible Service Interruptions. The Company's operations
require that its telecommunications networks operate on a continuous
basis. It is possible that the Company's telecommunications networks may
from time to time experience service interruptions or equipment failures.
Service interruptions or equipment failures resulting in material delays
would adversely effect the confidence of users of the Services as well as
the Company's business operations and reputation.
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(viii) Capacity Constraints; System Failure and Security Risks. The
Company's operations will depend upon the capacity, reliability and
security of its network infrastructure. The Company currently has limited
network capacity and will be required to continually expand its network
infrastructure. Expansion of the Company's infrastructure will require
significant financial, operational and management resources. There can be
no assurance that the Company will be able to expand its infrastructure on
a timely basis, at a commercially reasonable price, or at all. The
Company's operations will also be dependent on the Company's ability to
protect its computer equipment against damage from fire, power loss,
telecommunications failures and similar events. The Company's network
infrastructure will be vulnerable to computer viruses, break-ins and
similar disruptions from unauthorized tampering with the Company's
computer systems. Computer viruses or problems caused by third parties
could lead to material interruptions, delays or cessation in services.
Inappropriate use of the Internet by third parties could also potentially
jeopardize the security of confidential information stored in the computer
systems of users. Security and privacy concerns of users may limit the
Company's ability to successfully market its Services.
(ix) Limited Sales Force. The Company has a limited sales force and
does not have established distribution channels for its Services. No
assurance can be given as to the ability of the Company to establish or
generate sufficient demand for its Services, and the inability of the
Company to do so would have a material adverse effect on the Company's
business, financial condition and operating results.
(x) Dependence on Suppliers. The Company relies on other companies
to supply certain key components of its network infrastructure, including
tele-communications and networking equipment. There can be no assurance
that the Company will be able to obtain such services on the scale and
within the time frame required at a reasonable cost, or at all. The
inability to do so would have a material adverse effect on the Company's
ability to furnish its Services, financial condition and results of
operations.
(xi) Dependence Upon Key Personnel; Xxxxxxx Xxxxxx. The Company
depends upon the services of Xxxxxxx Xxxxxx, its President and Chief
Executive Officer. The loss of Xx. Xxxxxx'x services would be detrimental
to the Company's prospects. The Company does not contemplate obtaining
"key-man" life insurance with respect to Xx. Xxxxxx and the Company does
not have an employment agreement with Xx. Xxxxxx.
(xii) Limited Intellectual Property Protection. The Company relies
on a combination of copyright and trademark laws, trade secrets and
software security measures to protect its proprietary information. The
Company currently has no registered copyrights, trademarks or patents or
patent applications pending. It
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may be possible for unauthorized third parties to copy aspects of, or
otherwise obtain and use, the Company's proprietary information without
authorization.
(xiii) NASDAQ's OTC Bulletin Board Service; Risks Relating to Low
Priced Stocks. The Company's Common Stock currently trades on NASDAQ's OTC
Bulletin Board Service. Such market is characterized by limited and
episodic trading and limited liquidity. Investors could find it difficult
to dispose of, or to obtain accurate quotations as to the market value of,
the Company's Common Stock. In addition, the Market Regulation Division of
the National Association of Securities Dealers Inc. has commenced an
inquiry with respect to trading of the Company's Common Stock. The Company
has cooperated fully with such inquiry.
(xiv) Control By Xxxxxxx Xxxxxx. Following completion of the
offering, Xxxxxxx Xxxxxx will beneficially own approximately 10.5% of the
voting stock of the Company. As a result, Xx. Xxxxxx has the ability to
influence or control the election of a majority of directors and other
actions by stockholders with respect to the business and affairs of the
Company.
(xv) Year 2000 Compliance. The Company is aware of the issues
associated with the programming code in existing computer systems as the
year 2000 approaches. The "Year 2000 Problem" is pervasive and complex as
virtually every computer operation will be affected in some way by the
rollover of the two digit year value to 00. The issue is whether computer
systems will properly recognize date-sensitive information when the year
changes to 2000. Systems that do not properly recognize such information
could generate erroneous data or fail. The Company is in the process of
working with its software that the Company has licensed from third parties
will operate properly in the year 2000 and beyond. In addition, the
Company is working with its external suppliers and service providers to
ensure that they and their systems will be able to support the Company's
needs and, where necessary, interoperate with the Company's server and
networking hardware and software infrastructure in preparation for the
year 2000. Management does not anticipate that the Company will incur
significant operating expenses or be required to invest heavily in
computer systems improvements to be year 2000 compliant. However,
significant uncertainty exists concerning the potential costs and effects
associated with any year 2000 compliance. Any year 2000 compliance
problems of either the Company, its customers or vendors could have a
material adverse effect on the Company's business, results of operations
and financial condition.
k. The Purchaser represents that the foregoing representations, warranties
and covenants are true and correct as of the date hereof. The foregoing
representations, warranties and agreements shall survive the date hereof.
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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The Company represents and warrants and, where applicable, covenants
to the Purchaser as follows:
(a) The Company is a corporation duly organized, existing and in
good standing under the laws of the State of Delaware and has the
corporate power to conduct the business which it proposes to conduct.
(b) The execution, delivery and performance of this Agreement by the
Company has been duly approved by the Board of Directors of the Company.
(c) The Shares to be sold and delivered to the Purchaser hereunder
will be duly authorized and validly issued and, upon payment, fully paid
and non-assessable.
(d) Financial Statements - The Company has furnished to the
Purchaser the balance sheet of the Company as of June 30, 1998 and the
related Statement of Income dated as of June 30, 1998 which were prepared
by management of the Company and are unaudited, copies of which are
attached hereto as Exhibit A. Such financial statements have been prepared
from and are in accordance with the books and records of the Company, have
been prepared in accordance with generally accepted accounting principles
consistently applied, are true and correct and fairly present in all
material respects the financial position of the Company as of such date
and the results of its operations for the six-month period then ended in
accordance with generally accepted accounting principles, except for the
absence of notes and subject to year-end adjustments. Except as reflected
in such balance sheet and for obligations and liabilities incurred in the
ordinary course of business, the Company has no material (individually or
in the aggregate) obligations or liabilities, absolute, accrued or
contingent, as of the date of such balance sheet. There has been no
material adverse change in the business, assets, properties, operations,
condition (financial or other) or prospects of the Company since June 30,
1998.
III. MISCELLANEOUS
a. Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt required, addressed to the Company, at:
Worldwide Data, Inc.
00 Xxxxxxx xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx, Xxxxxx X0X0X0
Attn: President
and to the Purchaser at his address indicated on the last page of this
Agreement. Notices shall be deemed to have been given on the date of mailing,
except notices of change of address, which shall be deemed to have been given
when received.
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